US President Donald Trump has identified Canada’s dairy supply management system as a key factor behind his decision to impose a 50 per cent tariff on $20 billion worth of Canadian imports starting this August.
This regulatory framework, which governs the production and pricing of dairy, poultry, and eggs, is considered one of the most politically sensitive policies in the country, reports BBC.
Trump’s contentions
Trump has labelled the system “unreasonable”, arguing that its production quotas and strict import limits unfairly prevent American farmers from accessing the Canadian market.
The White House has further alleged “discrimination”, noting that Canada’s trade deal with the European Union provides European cheese producers with better market access than their US counterparts.
Despite these complaints, the US exported $1.3 billion in dairy products to Canada in 2025, even though American producers only have tariff-free access to 3.5 per cent of the domestic market.
A firm stance in Ottawa
Canadian officials have signaled that the sector remains a non-negotiable priority. Quebec Premier Christine Fréchette stated that the protection of the dairy industry is “non-negotiable”, a sentiment echoed by US-Canada Trade Minister Dominic LeBlanc.
LeBlanc described the system as a “cornerstone” of the national economy that protects rural communities and ensures consumers have access to high-quality, locally made products.
The power of dairy lobby
The dairy sector is widely regarded as Canada’s most influential political lobby, with support spanning all major parties. Farmers are known for their high-profile demonstrations, occasionally bringing cattle and tractors to Parliament Hill to protest potential trade concessions.
Established in the early 1970s, the system provides farmers with stable incomes through provincial marketing boards that set prices and limit production. While some imports are allowed, those exceeding set quotas face punitive tariffs ranging from 200 per cent to nearly 300 per cent.
Rising pressure for reform
The policy has faced international criticism beyond the Trump administration, including from the OECD and the United Kingdom, the latter of which halted trade negotiations in 2024 over cheese access.
Domestic critics, such as David Clement of the Consumer Choice Center and journalist Jen Gerson, argue that supply management is an “anachronistic” system that worsens the cost-of-living crisis by inflating prices. In May, a litre of milk costs an average of C1.95 in the US.
Political and economic risks
Despite these criticisms, 77 per cent of Canadians reportedly support the system to protect local agriculture and food sovereignty. David Wiens, President of the Dairy Farmers of Canada, argues that the framework provides greater price stability than other food categories.
Experts suggest that dismantling the regime would be both politically and financially difficult. Professor Ryan Cardwell of the University of Manitoba noted that the governing Liberals would likely lose parliamentary seats and would be forced to provide dairy farmers with a compensation package worth billions of dollars.
While nations like Australia and the EU have previously phased out similar systems, Cardwell suggests that in Canada, the policy is likely “not going anywhere”.
